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Learning, Sharing, and Teaching => Investor Alley => Topic started by: ender on May 21, 2016, 07:03:08 AM

Title: How does the trend of stock repurchasing affect PE valuations?
Post by: ender on May 21, 2016, 07:03:08 AM

I'm always curious about the "market is overpriced" aspects that people talk about. This is generally centered around PE ratios.

A lot of big companies have dumped many billions into stock buyback programs.

I'm curious what the actual effect of this on PE ratios is, because it seems that these buybacks would actually serve to increase PE ratios - is there any actual concentrated effort to investigate this? I have searched a fair bit but not really found anything.

Title: Re: How does the trend of stock repurchasing affect PE valuations?
Post by: forummm on May 21, 2016, 07:59:58 AM

It should have no effect. Price per share should rise, but at the same rate that earnings per share should rise.

Title: Re: How does the trend of stock repurchasing affect PE valuations?
Post by: Grog on May 21, 2016, 12:23:20 PM

http://www.philosophicaleconomics.com/2015/03/treps/

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